Correlation Between Methode Electronics and ALGOMA STEEL
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and ALGOMA STEEL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Methode Electronics and ALGOMA STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and ALGOMA STEEL GROUP, you can compare the effects of market volatilities on Methode Electronics and ALGOMA STEEL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Methode Electronics with a short position of ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and ALGOMA STEEL.
Diversification Opportunities for Methode Electronics and ALGOMA STEEL
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Methode and ALGOMA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and ALGOMA STEEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALGOMA STEEL GROUP and Methode Electronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Methode Electronics are associated (or correlated) with ALGOMA STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALGOMA STEEL GROUP has no effect on the direction of Methode Electronics i.e., Methode Electronics and ALGOMA STEEL go up and down completely randomly.
Pair Corralation between Methode Electronics and ALGOMA STEEL
Assuming the 90 days trading horizon Methode Electronics is expected to generate 1.39 times more return on investment than ALGOMA STEEL. However, Methode Electronics is 1.39 times more volatile than ALGOMA STEEL GROUP. It trades about 0.25 of its potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about 0.07 per unit of risk. If you would invest 815.00 in Methode Electronics on September 1, 2024 and sell it today you would earn a total of 185.00 from holding Methode Electronics or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. ALGOMA STEEL GROUP
Performance |
| Timeline |
| Methode Electronics |
| ALGOMA STEEL GROUP |
Methode Electronics and ALGOMA STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and ALGOMA STEEL
The main advantage of trading using opposite Methode Electronics and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, ALGOMA STEEL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ALGOMA STEEL will offset losses from the drop in ALGOMA STEEL's long position.| Methode Electronics vs. Southwest Airlines Co | Methode Electronics vs. Media and Games | Methode Electronics vs. NAKED WINES PLC | Methode Electronics vs. Singapore Airlines Limited |
| ALGOMA STEEL vs. ScanSource | ALGOMA STEEL vs. Tower Semiconductor | ALGOMA STEEL vs. LION ONE METALS | ALGOMA STEEL vs. PRECISION DRILLING P |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |